How Gender Lens Investing Promotes Equity

The field of impact investing has experienced significant growth in recent years, as has gender lens investing: a popular dimension of impact investing that allocates capital to companies and government entities that promote the advancement of women in a responsible, lasting way. This includes everything from promoting pay equity to supporting education and women’s health initiatives in communities around the world.

Christie Loftus and Holly Denton, co-chairs of OFI Global’s Women’s Network, recently spoke with Glen Yelton, ESG and Impact Analyst for SNW’s investment-grade fixed income team, which manages four impact investing strategies, including one focused on gender equity. Their conversation centered on the state of gender equality in the world, how gender lens investing can promote fairer practices, and how it can be applied to a fixed income portfolio.

Holly Denton: Gender lens investing seems like a fairly new concept. Why is it gaining popularity and how could greater equity benefit women and the economy?

Glen Yelton: With any social and civil rights movement, progress is made in fits and starts. Right now, we’re seeing a wave of women stand up and say, “Yes, we’ve made progress in the past. Let’s make more.” It seems like every day we’re offered a new example of women, and men, standing up against sexual abuse and harassment, and in so doing starting conversations about what it means to be a woman in the 21st century, what it means to be a woman in the workplace, and how we, as a society, can tackle pervasive sexism and the assumptions that keep women from reaching the same heights as men.

Unfortunately, we have quite a way to go. Consider some statistics:

Women now own 39% of businesses in the United States, yet are less likely to receive outside financing than their male peers.1

According to IFC/World Bank, a $320-billion global credit gap prevents female business owners from accessing the capital and land they need to start, expand, or formalize their businesses, which not only prevents their economic growth and the world’s economic growth, but can also make them more vulnerable.

The World Economic Forum released a report in October 2017 that concluded that it will take women 217 years to achieve parity with men globally on job opportunities and wages. This was the first time the wage gap increased since the report began publication in 2006.

The National Partnership for Women and Families reports that women working full time in the United States typically earn only 80 cents for every dollar a man makes. And women who are minorities earn even less, with African-American women earning 63 cents and Hispanic women only 54 cents. Based on current trends, the wage gap in the United States may not close until 2059.

A McKinsey Global Institute report found that gender parity could add as much as $12 trillion to the global GDP by 2025, but much more needs to be done to achieve equity. Gender lens investing can help influence these significant issues. It’s about creating positive social change, but in a way that benefits the investor and the economy, and incentivizes significant change for bond issuers.

Christie Loftus: Those are sobering numbers, and they underscore the importance of the issue. But how does gender lens investing incentivize companies and governments to change?

Yelton: The obvious answer is that by using a gender lens, investors can help finance gender equity initiatives or projects that effect positive change for women. This gives positive reinforcement to companies, agencies, and municipalities that are addressing gender inequality. It’s essentially saying, “We see what you’re doing here, we like it, investors like it, and we want to see more.”

But there’s more to it than that. The actual act of investing with a gender lens is itself valuable. Gender lens investing demonstrates to companies and municipalities that aren’t addressing these issues that investors want to put their money in socially conscious entities and bonds, and that not providing these investment opportunities is going to hurt, especially as the Millennial generation and Gen Z replace Baby Boomers as an economic force. Research has shown time and again that both generations are much more committed than their predecessors to using their money and their investments to promote their principles.

Denton: Fixed income is a key component of a balanced portfolio. What does gender lens investing look like in the fixed income space? What criteria do you look for when evaluating an issuer, and what are some red flags?

Yelton: Fixed income investment strategies with an impact focus are like any fixed income investment strategy, only with an emphasis on positive social change. A gender lens portfolio might include bonds issued by corporations or state, county, and city governments that have demonstrated a commitment to gender equity or whose bond-financed projects advance gender equality.

To determine which issuers and issues are appropriate for our gender equity strategy, we rate them on a variety of metrics (e.g., percentage of women in leadership positions) and compare them with their peers. We look at what the company is doing to improve female representation among its board members and c-suite executives. If the corporation or entity has a foundation or social initiatives, we examine whether the activities associated with these initiatives help women in a meaningful and lasting way. Do the initiatives improve educational opportunities or access to capital?

There are several things that would be seen as red flags for us. Corporations or government entities without any or with low percentages of women in positions of power, for example, would raise an eyebrow. On corporate boards, having one woman isn’t enough. Studies have shown that three women is the minimum required to achieve meaningful female representation. That doesn’t mean we don’t invest in companies with less than three women on their board, but it is something we think about since we want to see real representation.

Our process of screening for gender is always improving, and we are currently evaluating ways to improve our criteria, with input from the OFI Women’s Network. Not only do we want the process to be as quantitative and replicable as possible, we want our gender lens criteria to accurately filter for companies and municipal governments and agencies that are making a true difference.

Loftus: How long has SNW been involved with gender lens investing? How do you expect it to grow in the future?

Yelton: SNW introduced our Gender Equity Focus when we revamped our firm’s overall ESG and impact approach in 2016. We had heard from our clients and partners that they were interested in gender lens investing, and that informed our decision to introduce the strategy.

Interest in ESG and impact investing is on the rise today. We’re seeing more demand for gender lens investment products, and asset management firms are beginning to meet this demand. According to Veris Wealth Partners, the total assets under management in publicly traded securities using gender lens investment criteria increased from $100 million in 2014 to $561 million in 2016. This is more than a 500% increase in only two years.

You need look no further than the current #TimesUp and #MeToo movements, as well as a general movement by women to speak up against workplace inequality, to get a sense of how significant the issue of gender equality has become. Both men and women are looking for effective ways to foster significant changes and they’re finding investment solutions that do exactly that.

Gender inequality is a global issue that impacts women and families and has significant consequences for economies. Resolving the issue will require a multi-pronged approach that leads to equal representation for women in leadership positions, wage equality, non-discriminatory family leave policies, and other critical measures. Additionally, easing many of the barriers that keep women from participating equally in the sphere of economics will help immeasurably in leveling the playing field. Fair access to capital, to education, to healthcare and other resources must be supported, in addition to efforts to ease the burdens of family care that have historically disproportionately fallen on the shoulders of women.

^Source: American Express OPEN, “The 2017 State of Women-Owned Businesses Report,” November 2017.

This material is provided for general and educational purposes only, is not intended to provide legal or tax advice, and is not for use to avoid penalties that may be imposed under U.S. federal tax laws. OppenheimerFunds is not undertaking to provide impartial investment advice or to provide advice in a fiduciary capacity. Contact your attorney or other advisor regarding your specific legal, investment or tax situation.

OFI Global Asset Management (“OFI Global”) consists of OppenheimerFunds, Inc. and certain of its advisory subsidiaries, including OFI Global Asset Management, Inc., OFI Global Institutional Inc., OFI SteelPath Inc., OFI Global Trust Company, SNW Asset Management, LLC and OFI Advisors, LLC. The firm offers a full range of investment solutions across equity, fixed income and alternative asset classes. The views herein represent the opinions of OFI Global and are subject to change based on subsequent developments. They are not intended as investment advice or to predict or depict the performance of any investment. The material contained herein is not intended to provide, and should not be relied on for, investment, accounting, legal or tax advice. Further, this material does not constitute a recommendation to buy, sell, or hold any security. No offer or solicitation for the sale of any security or financial instrument is made hereby.

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